Malawi: Of security and women assaults

Blantyre - Jan 20, 2012

The barbaric lawlessness which broke out in some parts of Lilongwe through the heartless stripping of women by some hoodlums has astonished me. It is only in a lawless and stateless nation like Somalia where such foolish and horrendous incidents can occur and even the sensible Somalis do not do it. I am wondering as to how such criminal and nefarious acts can occur in a nation like ours where our president boasts at podium that the police service has the best Inspector General in the name of Peter Mukhito.

The horrible part of the infamous gender violence are allegations that some civilian and uniformed police officers witnessed the incidents and never intervened timely as expected of patriotic law enforcers who are mentored and inspired by the best IG the country has ever had.

Following this incident, I question Mutharika’s rationale for boasting on the podium that Mukhito is the best policeman and inspector general the country has ever had. I have serious reservations with Mukhito’s so-called outstanding performance which Mutharika praises when others think otherwise for a number of reasons. Mukhito and his officers have to date miserably failed to trace and arrest machete-wielding youths who like terrorists used DPP vehicles on July 19 ahead of July 20 peaceful civilian protests to intimidate the citizenry as they criss-crossed the streets of Blantyre.

Another incident that baffles me is the news that Mukhito was meeting the Polytechnic slain student late Robert Chasowa. Up to date, Mukhito and his commissioners have not briefed the nation what his Criminal Investigations Department found in relation to the death of the deceased student.

That’s not the end of the story on my serious reservations with the so-called finest Inspector General of Police. The latest study by Transparency International has just revealed that Mukhito heads the most corrupt institution in the country. I am not sure whether one can take credit for that.

I still doubt how he can best be described as the finest police officer in the land when under his tenure as police boss, his officers miserably failed to control protesting vendors in the capital city of the land where even the police headquarters itself is located. Thanks to our patriotic members of the Malawi Defence Force who actually intervened and restored order of the city.

Surely, should the president be calling Mukhito the finest police chief when during his tenure women are being stripped in the streets in broad-daylight? I have my reservations.

How I wish the IG had a system of gathering intelligence within the police service! I am thinking this aloud because if he had that system, he would have discovered that most of his juniors are so bitter with him for forcing them to return the allowance they received after working tirelessly during the July 20 and 21 demonstrations. The Twister has just heard from the rumour mill that the police are so highly demotivated because of the order that those who pocketed the ‘July 20’ fat allowances should return them on a willy-nilly basis. I am not surprised by their sloppy response of the demotivated police officers.  

My advice to Mukhito: Let him ask those in administration department on how to do soul searching within the service using the basic but important three analytical tools of PESTLE, SWOT and GAP. After those analyses and implementation of how to turn weaknesses into strengths and threats into opportunities and filling the gaps, I will salute him as our finest IG.

Debts our children will pay

Despite their fine credentials, I don’t admire former Finance Minister Ken Kandodo and his successor Ken Lipenga because I know they have to defend government policy even if they are not comfortable with it. Actually, when being inaugurated as cabinet ministers, they take oath of allegiance by pledging their support and loyalty to the incumbent president and our motherland.

I don’t admire Ken because his position as finance minister demands him to defend the zero-deficit budget regardless of all its well-known flops and repercussions.

When the budget had just been passed I had no kind words for Ken because I shared the view of the other critics that the zero deficit budget would end up as a failed experiment.

I recall one economist rubbished my argument on my fears on domestic borrowing charging it is an important part of fiscal policy and management of aggregate demand in any economy. His argument was that in any economy even in developed nations, when the government is running a budget deficit, it has to borrow money through the issue of debt instruments such as Treasury Bills and long-term government bonds. Such borrowing in his opinion is okay because the emergence of a rising budget deficit due to a weakening economy on one hand means government spending on priority areas such as health, education, transport and agriculture on the other hand.

I argued and still maintain my stand that local borrowing defeats the concept of zero-based budget because it is crowding out the private sector through high taxes, inflation and forex shortages. In that scenario, the description that the budget is pro-development and pro-poor is a fallacy.

On the punitive taxes, my argument has remained that our economy is at the stage where the resource base is so narrow hence overtaxing institutions and people is counterproductive. The same simple argument remains, thus if you want to milk the cow, you need to feed it. In this case, the government is heavily taxing people and businesses which are the source of growth forcing some of them to retrench and even close down. The question is: How do you expect growth from a thin animal, which is being over-milked through punitive taxes?

I now weep for our economy because the harsh reality of our goofs has caught up with us. Despite the huge taxes the revenue authority is milking from us and various institutions, government is slipping into deficits, which it is attempting to tame by resorting to borrowing both domestically and internationally. The consequence of heavy domestic borrowing is the crowding out of private sector in the debt capital market in short and medium term while in the long run, domestic borrowing would translate to even higher taxes as government will be hunting for money to repay that huge accumulated debt.

While Malawi was a beneficiary of debt cancellation few years ago, we have started accumulating debt. While locally, government issued K30 billion worthy of bonds in the market, the country has secured a US$200 million debt from international lenders. If you think, thus the only money our children and their children will repay, you are mistaken because, there is also over US$800 million debt which the country had at the end of last year. If you ask me, I still have doubts if the US$200 million new foreign debt will steady the economy when every month this country is required to spend US$30 million on fuel alone; and this entails depleting almost half of that debt on fuel in three months.

What this means is that our economic woes are far from over and our craving for premature economic independence through experiments such as zero deficit budget will result in the suffering of Malawians.

I know government has problems with some of the prescriptions from IMF, but at the stage we are, we need support from many partners. One of the issues we collided with IMF was on the issue of the value of the Kwacha. President Bingu wa Mutharika has been arguing that if Kwacha is devalued the prices of goods and services will go up. But have prices of goods and services failed to go up because an overvalued Kwacha. Check the table on how prices of goods have defied Mutharika’s assumptions.

Malawi: Politics and speed of implementation

BLANTYRE – January 13, 2012:

I am following with keen interest the wrangles in the opposition United Democratic Front (UDF) because in my view, there are four parties that have high chances of winning the 2014 presidential elections. The parties are the ruling Democratic Progressive Party, the Malawi Congress Party, the People’s Party and the UDF. My biased opinion is based on the structures these parties have at the grass-root level. Since I consider the UDF to be one of the major parties, I take interest in their wrangles.

As the two factions are battling it out for supremacy and leadership, this week I reflected on one statement from the Friday Jumbe faction.

It reads in part: “The fighting you are witnessing is not personal as some people would like us to believe. It is not a fight between UDF and Atupele Muluzi or between UDF and Dr George Mtafu or between UDF and Kennedy Makwangwala.

“The fight is higher and nobler than that. It is a fight about principles. You are witnessing a fight between selfishness and selflessness, between hero worship and human dignity, between individualism and collectivism, between authoritarianism and democracy, between anarchy and order, between lawlessness and legality – and above all between politics of exclusion and politics of inclusion.”

The powerful statement adds: “Where we are trying to give every member of the UDF an equal opportunity to have a shot at leadership, you will see them doing everything possible to turn UDF into a personal enterprise that serves the interests of one single family, one tribe.”

I regarded the statement as powerful because it sums up the dirty and nepotistic politics practised on this continent. This is a continent where leaders do all they can to surrender power to their sons, brothers, sisters, daughters, cousins or their handpicked minions. Strangely, when the handpicked sons and brothers or surrogates are introduced as presidential candidates, bootlickers and hero worshippers come in abundance. What baffles me is that some of the bootlickers are highly educated politicians, who elsewhere would have been opposing the nepotistic and dynastic succession plan.

Examples on nepotistic and dynastic succession on the continent are numerous. It is claimed Egyptian ousted leader Hosni Mubarak groomed his son Gamal to be his successor while Muammar Gaddafi wanted to be succeeded by his son Saif.

Even here in Malawi, the trends are the same. If all goes by their plans, Peter Mutharika might succeed his brother Bingu and Atupele might snatch the UDF leadership from Muluzi’s successor Friday Jumbe.

Whilst people hate nepotism, tribalism, dynasities, personalisation of political parties, I have observed with eagerness how do handpicked bloody minions of those in power manage to succeed their fathers, brothers, uncles and relations.

The Twister believes several factors are exploited and used to the fullest to achieve the disgusting and detested succession deals which paradoxically get supported. Politics of financial favours and handouts, nepotism buttered with tribalism and speed of implementation are some key strategies that are used.

Those who support the bloody relations of presidents are great beneficiaries; and hate the idea of losing their lucrative contracts or handouts if they oppose dynastic succession. Handouts become in form of multi-million contracts for the politicians’ business allies or even mere K50s, which women dancers get.

The nefariousness of nepotism buttered with tribalism is well known and this is why the UDF statement talks about “politics of regionalism and tribalism.” Some politicians have even formed tribal groupings to consolidate their grip on power.

 Let me wind up by commenting on the third factor which is speed of implementation.  In my view, the handpicked surrogates easily beat the principled and well experienced rivals because of speed of implementation.

Take it or leave it, the fact remains that Peter Mutharika has been speedily and extensively marketed even before his rivals within the DPP have identified their candidate to challenge him. Likewise, if you ask the Jumbe camp, who will be their presidential candidate, you will not get a straight forward answer. Instead you will be offered a lecture on party rules, regulations and policies, the eligibility criteria, the convention and the need to follow all principles and procedures in identifying the presidential candidate. Ask the same question to the other camp, the answer will be automatic – Atupele Muluzi.  The trick lies in the speed of implementation strategy.

One blogger Richard Wilson wrote “increasing your speed of implementation means making decisions faster, receiving feedback faster, and adjusting and growing further more rapidly as well.

“With everything in life we move through learning curves whether it is starting a new career, starting a new business, or launching a new product.  Speed of implementation is about moving up that learning curve 3x faster than your competition.”

Wilson adds: “In short you can evolve faster, meet your goals sooner, and over a short period of time out-pace everyone around you in your industry by just taking massive action.”

I find Wilson’s argument plausible because while the Jumbe camp are right in their observation about principles, selflessness, collectivism, legality and democracy, Atupele despite ignoring party rules and even flouting the UDF constitution will draw most supporters to his side because of launching his campaign early. Democracy is about numbers and Atupele’s numbers might prevail over Jumbe’s adherence to principles and rule of law.

One of my mentors at University of Malawi’s Management Development Centre once said: “If there’s anything that matters most for entrepreneurs, it’s getting things done and getting them done fast.” I believe in political entrepreneurship, the rule is the same.

If you ask today who will be our next president, the names that are mentioned are those of Joyce Banda, Henry Phoya, Atupele Muluzi, Peter Mutharika, courtesy of speed of implementation tactic. Never be surprised in 2014 if one of them becomes our head of state, unless other powerful gurus in our society team up and devise a powerful strategy which can overtake the early campaigners.

Economic jokes

I recently took an interest to check the type of schools, which are sending most students to our national universities. Figures for the past three years revealed that most students who are qualifying for university studies are from national secondary schools , then those from private secondary schools and high schools.

Most district secondary schools and community day secondary schools send few students to the public universities. The reasons for such trends are well known and they include availability of well qualified teachers and well-resourced facilities in national secondary schools, private secondary schools and high schools.

The facilities in most district and community day secondary schools are inferior when compared to those of national secondary schools, academies and high schools, hence this is even reflected in the MSCE results and the number of students these different categories of institutions send to universities.

Guess my concern? While in government boarding secondary schools each pupil pays about  K10,000 per term or K30,000 per year and at private secondary schools each student pays about K50,000 per term or K150,000 per year while  in high schools and academies, the fees range from K100,000 per term to K500,000; strange development happens when the students qualify for studies at public universities.

All of a sudden a student from a government national secondary school whose parents were paying K30,000 becomes poverty-stricken that they have to queue for a loan of K25,000 from Malawi Savings Bank.  Even students who qualified for the university after studying at private secondary schools where their parents were paying K150,000 as fees for three terms line up for loans. There are even those whose parents were paying K500,000 per term in high school who also queue for K25,000 loans for university education.

I don’t know where else in the world do students who used to pay secondary schools fees pegged at either K30,000 or K150,000 per year fail to pay K25,000 for their university studies; and have to stage strikes over loan schemes. In Malawi, this is not just a joke of our time, but reality on the ground.  

Is this the only joke in the country? Nay! Go into some of these shops and find out the stuff we are wasting our forex on? Sometimes, I wonder why we grow lots of tobacco and whine at low prices at auction floors where we sell the raw leaf? I thought the best cigarettes and cigars in the world would have been manufactured here in Malawi, since we have the raw materials in abundance and all we need is tangible investment. 

Malawi: The tale of devaluation

TWISTER 

BY BRIAN LIGOMEKA

The arrogance of those in power has borne so many sour fruits such as retrenchments, companies’ closure, the soaring unemployment, the rising prices of goods and services, as well as acute forex and fuel shortages. If you are wondering about the arrogance I am referring to, as far as I am concerned besides the expulsion of the British top diplomat to Malawi, another act of arrogance was the conducting of an experiment called zero-deficit budget, a term I have even questioned because in my economics class I learnt about zero-based budgeting and nothing about this concept called zero-deficit budget.

The outcome of the experiment called zero deficit budget is a disaster as it has backfired with all sorts of repercussions. The sight of fuel queues snaking hundreds of metres on various roads that lead to filling stations and women sleeping at Admarc depots waiting for subsidised fertilisers give a very realistic reflection of how the experiment called zero-deficit budget has boomeranged and should be abandoned.

The arrogance that lead to those in authority to over-value the economic and political resilience of this country just because they have been blinded by power after their personal finances improved tremendously within few years - far beyond their earned income, and thought the country does need donors including having a programme with International Monetary Fund (IMF) has not helped matters.

I don’t understand why we have been refusing to devalue our currency and revise our growth targets as advised by the IMF when currency devaluation is not a new phenomenon. Some literature by the Reserve Bank of Malawi clearly explains that the country has been devaluing its currency over the years and the management of exchange rate in Malawi has been pursued with some major policy objectives in mind. The policies include: attainment of growth in real income; maintenance of a viable balance of payments position; and attainment of stable domestic prices.

It is on record that the use of the exchange rate as an instrument of monetary policy began as early as 1965 when the Reserve Bank of Malawi became fully operational. Soon after attaining self rule from Britain in 1964, Malawi introduced its own currency. For some years soon after independence, the Malawi currency was pegged at par to the British pound sterling and this continued until November 1973.

 One paper by the central bank says between1965-1973, the Malawi currency moved in tandem with movements in the British sterling, such that when the latter was devalued by some 14 percent in November 1967, the Malawi pound was also devalued by the same magnitude.

History has it that from 1973, Malawi authorities responded to the movements in the international currencies by de-linking the Malawi kwacha from the British pound, and pegging it to a trade-weighted basket of the British pound and the US dollar. In this system, the Reserve Bank fixed the exchange rate by setting daily buying and selling rates for the US dollar and the British pound in the light of foreign exchange market developments.

Those who have seen many rains can recall that around 1980s, the country’s economy faced several shocks, which resulted largely from weak external demand for the country's primary products in world markets. Guess what Dr Kamuzu Banda’s regime did in response to the crisis. In April 1982, the kwacha was  devalued by 15 percent. This was followed by another devaluation of 12 percent in September 1983.

That was not the end of devaluations. New challenges affected Malawi economy as the conflict in Mozambique between ruling Frelimo and opposition Renamo disrupted Malawi’s traditional transport routes to the maritime ports of Beira and Nacala. From 1984, Malawi had to rely on long overland routes to the ports of Durban in South Africa and Dar-es-Salaam in Tanzania, a change which significantly increased the country's transportation costs thus (Cost, Insurance and Freight) and/ Free on Board margin from only 22 percent in the 1970s to over 40 percent since 1984. This development of using South African and Tanzanian seaports for exports worsened the country's terms of trade. In response to that scenario, Kamuzu administration resorted to active exchange rate changes which saw the kwacha being devalued by 15 percent in April 1985 and a  year later it was devalued by 10 percent.

The trend continued with further devaluations of 20 percent in February 1987 and another depreciation of 15 percent in January 1988. Kamuzu administration never stopped on that note as the currency was devalued by 7 percent in1990; and twice in 1992, by 15 percent in March and by 22 percent in percent in July..

Come February 1994, the foreign exchange market was completely liberalized and the kwacha was allowed to float freely. Government’s move was aimed at improving the country's export competitiveness, providing an efficient foreign exchange allocation mechanism; dampening speculative attacks on the kwacha; and restoration of both investor and donor confidence; among other objectives.

The foreign exchange market liberalization resulted in the authorisation of dealer banks to buy and sell foreign exchange at freely determined market exchange rates; and foreign exchange bureaus were authorized to engage in spot transactions with the general public on the basis of exchange rates arrived at with their clients among other developments

The benefits of a liberalised foreign exchange regime are well chronicled. The floating currency ensures that movements of the exchange rate are in line with the market forces of demand for and supply of foreign exchange. In this case, the foreign exchange value of the domestic currency settles at a price, which equates the quantity of foreign exchange demanded to the quantity supplied.

It should be noted that when authorities floated the kwacha in February 1994, the currency immediately plummeted, from its level of K6.70 per US$1 to K9.88 per US$1. By end-November of 1994, the kwacha had depreciated in nominal terms by over 290 percent against the US dollar; 300 percent against the British pound; 279 percent against the South African rand; and 335 percent against the German mark, reflecting spending overruns which led to loss of confidence in the kwacha. Initially, such massive depreciations were viewed as excessive. In fact the general consensus was that the depreciation was more than what was implied by the economic fundamentals.

While those massive devaluations were shocking, but the advantage on the ground was that  forex was readily available and there were no fuel queues in Malawi. Between 1995 to 1997 the kwacha was stable and was slightly devalued in 1997.

As were the trends in the past, there were some devaluations and thus from August 1998 to December 1999, the nominal exchange value of the kwacha ranged between K42 to a US dollar and K46. The trend of devaluations continued during the rest of Bakili Muluzi’s regime just as was the case during Kamuzu’s regime.

I have cited all these figures and trends because the administration of President Bingu wa Mutharika treats the issue of devaluation as a strange phenomenon to the extent that one of the issues that led Malawi’s programme with IMF is the issue of the value of the Kwacha.

While some economists look at benefits of devaluation such as competitiveness of exports, which provides a boost for domestic demand and leads to an improvement in the current account deficit, Mutharika looks at devaluation as a ‘dangerous economic animal’ which will trigger inflation.

Mutharika was once quoted: “I have resisted devaluation and will continue to resist devaluation because I need to give the business community and everybody in Malawi a stable foreign exchange regime. I am an economist and I understand and follow what is happening around the world. I am not going to devalue the kwacha to please one or two people.”

Mutharika’s monetarism thinking tends to ignore the fact monetary policies do not exist in a vacuum but in a macro-economic environment. The question is: With the rising prices of goods, forex and fuel shortages coupled with our diplomatic gaffes, are we benefiting anything from an over-valued Kwacha?